Macroeconomics
->The branch of economics that is concerned with the major, general features of a country’s
economy
Policies-> methods or tools that the government uses to achieve the economic objectives
o Monetary policy: managing the money supply
o Fiscal policy: raising tax and government spending
o Supply side policies: managing the factors of production especially labour,
capital and enterprise
Four main objectives of macroeconomic policy
Economic growth
Minimising unemployment
Price stability
Stable/ improving balance of payments on current account
1. Economic growth
Includes and implies raising living standards and improving economic welfare
GDP is a measure of economic growth
o GDP-> the sum of all goods and services, or level of output, produced in the
economy over a period of time e.g. 1 year
o Real GDP-> a measure of all the goods and services produced in an economy,
adjusted for inflation. The adjustment transforms changes in nominal GDP,
which is measured in terms of money, into a measure that reflects changes in
the total output of the economy
o Nominal GDP-> GDP measured at the current market prices, without
removing the effects of inflation
Short run economic growth- an increase in actual, real national output-> can also be
defined as the increase in real output is produced from using currently available (or
“idle”) resources, i.e. the factors of production
o Real national output is the value of all goods and services (after taking
account of inflation) that are bought/ produced by the economy in a given
period of time
o Typically achieved through an increase in aggregate demand
Could also be due to an increase in short run aggregate supply (fall in
the costs of production)
Long run economic growth- an increase in the productive capacity of the economy
o Productive capacity is the potential output that an economy is capable of
producing using all available factors of production at a sustainable/realistic
level.
o The productive capacity of an economy is similar to long-run aggregate
supply and improvements in productivity
2. Maintain “full” employment
Keep unemployment low
Full employment-> when the demand and supply for labour in an economy are in
equilibrium at the price of market wages
->The branch of economics that is concerned with the major, general features of a country’s
economy
Policies-> methods or tools that the government uses to achieve the economic objectives
o Monetary policy: managing the money supply
o Fiscal policy: raising tax and government spending
o Supply side policies: managing the factors of production especially labour,
capital and enterprise
Four main objectives of macroeconomic policy
Economic growth
Minimising unemployment
Price stability
Stable/ improving balance of payments on current account
1. Economic growth
Includes and implies raising living standards and improving economic welfare
GDP is a measure of economic growth
o GDP-> the sum of all goods and services, or level of output, produced in the
economy over a period of time e.g. 1 year
o Real GDP-> a measure of all the goods and services produced in an economy,
adjusted for inflation. The adjustment transforms changes in nominal GDP,
which is measured in terms of money, into a measure that reflects changes in
the total output of the economy
o Nominal GDP-> GDP measured at the current market prices, without
removing the effects of inflation
Short run economic growth- an increase in actual, real national output-> can also be
defined as the increase in real output is produced from using currently available (or
“idle”) resources, i.e. the factors of production
o Real national output is the value of all goods and services (after taking
account of inflation) that are bought/ produced by the economy in a given
period of time
o Typically achieved through an increase in aggregate demand
Could also be due to an increase in short run aggregate supply (fall in
the costs of production)
Long run economic growth- an increase in the productive capacity of the economy
o Productive capacity is the potential output that an economy is capable of
producing using all available factors of production at a sustainable/realistic
level.
o The productive capacity of an economy is similar to long-run aggregate
supply and improvements in productivity
2. Maintain “full” employment
Keep unemployment low
Full employment-> when the demand and supply for labour in an economy are in
equilibrium at the price of market wages
